The key to long-term success in the fashion industry is to start trends and continually push the envelope — a philosophy that also applies to its ESG priorities.
The $2.5 trillion industry accounts for about 8 percent of the world’s carbon emissions when considering the entire value chain — higher than the entire iron and steel manufacturing industry combined, for comparison. Without any intervention, that figure is projected to increase more than 60 percent by 2030. However, there is a growing and collective awareness of environmental impact across the industry. Companies are discovering sustainability is not just a fad, but a new standard that is here to stay.
A proliferation of greening initiatives from industry players has emerged with public announcements of policies to tackle this issue, measures to address their supply chain footprints, promotion of circular economy practices and encouragement for sustainable brands growing increasingly popular. However, despite these various green initiatives from several early trendsetters in the fashion industry, formidable challenges lay ahead on the path to scaling up sustainability — especially when it comes to supply chain strategies.
The lack of environmental impact information and outdated technology are two ubiquitous issues plaguing industrial supply chains in general, but they are especially significant in the context of the fashion industry.
Due to highly price-competitive environments, upstream supply chain participants have little motivation to invest in improvements. Downstream supply chain participants that rarely have a personal stake, such as powerful brands and retailers, hardly encourage prioritization of sustainability upstream. These dynamics have led to the development of stagnant supply chains largely unable to respond to the urgency of the fashion industry’s significant carbon footprint.
Given that most emissions are produced along the supply chain, companies’ inability to monitor and track this data means that there is not a starting point to begin improving their environmental footprints.
In particular, inadequate data collection infrastructure along the supply chain has resulted in a shortage of environmental data and information transparency. According to the 2020 Fashion Transparency Index survey, while 78 percent of brands have policies on energy and carbon emissions, only 16 percent publish data on the annual carbon footprints of their supply chain. Given that most emissions are produced along the supply chain, companies’ inability to monitor and track this data means that there is not a starting point to begin improving their environmental footprints.
The reluctance to upgrade to new technology can be partly attributed to thin operating margins of fashion supply chains leading to inefficiencies along the entire chain. One of the most candid illustrations of inefficiencies caused by antiquated technology is in the manufacturing process, where conventional practices still take 2,700 liters — or three years’ worth of drinking water — to make a typical cotton T-shirt.
Traditional manufacturers abide by the “if it ain’t broke, don’t fix it” adage, while the ultimate retailer of the shirt has no direct ties to the manufacturer. Thus even if the manufacturer had a sustainability policy, it would be difficult to enforce. When both upstream and downstream participants of the supply chain are at odds with modernization, it prevents the changes needed to respond to the climate impact of the industry.
But it is not all doom and gloom. This is where green finance and technology come in. Their dual adoption can begin to address the environmental data gaps and also boost efficiency for production processes in the supply chain that would usher along a much-needed evolution of the fashion industry towards greater sustainability.
Digital technology will play a pivotal role in addressing information transparency and environmental reporting in the fashion industry by facilitating data collection along the supply chain. Using blockchain and cloud-based technology, a number of startups are already laying the groundwork.
For example, blockchain platform Provenance helps trace and certify supply chains to enable ethical procurement decisions. Another startup, Galaxius, offers a cloud-based system that tracks supply chain activity from fabric orders to garment delivery.
Beyond startups, fashion luxury giant Kering Group launched an app called My EP&L that tracks carbon emissions, water consumption and air and water pollution along its supply chain to educate designers and students on sustainable design principles. Recently, Stella McCartney and Google Cloud announced a partnership to determine the environmental impact of various types of raw materials. All of these efforts contribute to advancing data collection at different points along the supply chain and have the potential to provide unprecedented levels of transparency for the industry. (…)
Phylicia Wu
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